Tuesday, September 08, 2020

 

Nazanin Zaghari-Ratcliffe faces new charge, Iranian media reports

State TV says British-Iranian dual national appeared in Tehran court on Tuesday

Nazanin Zaghari-Ratcliffe has been under effective house arrest after her release from prison due to the coronavirus pandemic after serving nearly all of her five-year sentence. Photograph: Reuters
Associated Press in Tehran

The British-Iranian dual national Nazanin Zaghari-Ratcliffe faces a new, unspecified charge, according to a report on Iranian state TV, which also said she had appeared in court on Tuesday morning.

The report did not elaborate beyond saying Zaghari-Ratcliffe has appeared before a branch of the country’s revolutionary court in Tehran, where she was first sentenced in 2017.

Labour MP Tulip Siddiq said she had spoken to Zaghari-Ratcliffe who confirmed she was taken to court on Tuesday morning and told she was facing another trial on Sunday.

Zaghari-Ratcliffe has been under effective house arrest following her release from prison due to the coronavirus pandemic after serving nearly all of her five-year sentence. She has been wearing an ankle tag that limits her movements to within 300 metres (984ft) of her parents’ home in Tehran.

Zaghari-Ratcliffe was arrested during a holiday with her daughter in April 2016. Her family says she was in Iran to visit family, denying she was plotting against the state. She was accused of plotting the “soft toppling” of Iran’s government.

Zaghari-Ratcliffe worked for the Thomson Reuters Foundation, the charitable arm of the news agency.

The new charge comes after Zaghari-Ratcliffe’s family linked her detention to Iran’s negotiations with the British government over a £400m settlement ($530m) held by London, a payment the late Iranian Shah Mohammad Reza Pahlavi made for Chieftain tanks that were never delivered.

Tehran has denied her detention was linked to the negotiations. The charges could be an attempt to gain new leverage in the negotiations.

Iran was hit hard by the coronavirus early this year, becoming the worst-affected country in the Middle East. Since then, it has reported more than 391,000 cases and 22,542 deaths.

Topics
Timeline


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Arrest in Tehran

Nazanin Zaghari-Ratcliffe is arrested at Imam Khomeini airport as she is trying to return to Britain after a holiday visiting family with her daughter, Gabriella.

Release campaign begins

Her husband, Richard Radcliffe, delivers a letter to David Cameron in 10 Downing Street, demanding the government do more for her release.

Sentenced

She is sentenced to five years in jail. Her husband says the exact charges are still being kept a secret.

Hunger strike

Nazanin Zaghari-Ratcliffe's health deteriorates after she spends several days on hunger strike in protest at her imprisonment.

Appeal fails

Iran’s supreme court upholds her conviction.

Boris Johnson intervenes

Boris Johnson, then Foreign Secretary, tells a parliamentary select committee "When we look at what [she] was doing, she was simply teaching people journalism". Four days after his comments, Zaghari-Ratcliffe is returned to court, where his statement is cited in evidence against her. Her employers, the Thomson Reuters Foundation, deny that she has ever trained journalists, and her family maintain she was in Iran on holiday. Johnson is eventually forced to apologise for the "distress and anguish" his comments cause the family.

Health concerns

Her husband reveals that Zaghari-Ratcliffe has fears for her health after lumps had been found in her breasts that required an ultrasound scan, and that she was now “on the verge of a nervous breakdown”.

Hunt meets husband

New Foreign Secretary Jeremy Hunt meets with Richard Ratcliffe, and pledges "We will do everything we can to bring her home."

Temporary release

She is granted a temporary three-day release from prison.

Hunger strike

Zaghari-Ratcliffe is on hunger strike again, in protest at the withdrawal of her medical care.

Diplomatic protection

The foreign secretary, Jeremy Hunt, takes the unusual step of granting her diplomatic protection – a move that raises her case from a consular matter to the level of a dispute between the two states.

Travel warning

The UK upgrades its travel advice to British-Iranian dual nationals, for the first time advising against all travel to Iran. The advice also urges Iranian nationals living in the UK to exercise caution if they decide to travel to Iran.

Hunger strike in London

Richard Ratcliffe joins his wife in a new hunger strike campaign. He fasts outside the Iranian embassy in London as she begins a third hunger strike protest in prison.

Hunger strike ends

Zaghari-Ratcliffe ends her hunger strike by eating some breakfast. Her husband also ends his strike outside the embassy.

Moved to mental health ward

According to her husband, Zaghari-Ratcliffe was moved from Evin prison to the mental ward of Imam Khomeini hospital, where Iran’s Revolutionary Guards have prevented relatives from contacting her.

Zaghari-Ratcliffe's five year old daughter Gabriella, who has lived with her grandparents in Tehran and regularly visited her mother in jail over the last three years, returns to London in order to start school.

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UK

HMRC targets furlough fraudsters after up to £3.5bn wrongly paid out via scheme

Perm sec Jim Harra tells MPs the scheme's fraud and error rate "could be between 5% and 10%" of £35.4bn bill
Jim Harra spoke to the Public Accounts Committee remotely this week. Screenshot: Parliament TV

08 Sep 2020

Up to £3.5bn from the government's furlough scheme could have been paid out in error or due to fraudulent claims, HM Revenue and Customs has said.

HMRC permanent secretary Jim Harra told MPs on Monday that 27,000 "high-risk" cases were being pursued amid fears that 5-10% of applications could have been claimed fradulently or in error.

Official figures show as much as £35.4bn has been paid out through the government's job retention scheme since it was established in April.

The scheme paid 80% of furloughed workers' wages in the first months of lockdown with around 1.2 million employers making the use of the system by August.

As many as 2.7 million self-employed people also used the scheme during the pandemic, claiming a further £7.8bn in funding from the Treasury.

Speaking to the Public Accounts Committee on Monday, Harra said the tax authority would not pursue employers who had made claims in error and would instead focus on tackling fraudulent activities.

"We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%," Harra said.

"That will range from deliberate fraud through to error.

"What we have said in our risk assessment is we are not going to set out to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time."

He added: "Although we will expect employers to check their claims and repay any excess amount... what we will be focusing on is tackling abuse and fraud."

The HMRC chief executive also revealed that 8,000 calls had been made to HMRC's fraud telephone hotline in regards to the scheme.

And he encouraged workers who believed their employers were making fraudulent claims to report them to his department.

He added: "While we can't get involved in any relationship between the employee and employer, we can certainly reclaim any grant that the employer is not entitled to, which includes grants they have not passed on in wages to their employees."

The job retention scheme is set to wind down from next month, with chancellor Rishi Sunak repeatedly dismissing calls from opposition MPs to extend the support further.

Former Conservative Party leader Iain Duncan Smith said the figures proved it was the right time to bring the scheme to a close.

"It's rapidly being defrauded more and more because employers are making furloughed people work and telling them they can't say anything or they'll lose their jobs," he told the Daily Mail.

"The scheme is open to fraud and abuse and it's hard to check where the money is actually going.

"The sooner we bring this scheme to an end, the sooner we can stop haemorrhaging money and get the country back to work."

John Johnston is a reporter for CSW's sister title PoliticsHome, where this story first appeared.

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Citing ‘criminal exposure’ in straw-donor scheme and possible perjury, House announces investigation into Louis DeJoy


Published on September 8, 2020 By Jake Johnson, Common Dreams
Postmaster General Louis DeJoy speaks during a Senate hearing. (Screenshot/YouTube.com)

MR.WONDERFUL'S DOPPELGANGER

House Oversight Committee Chairwoman Rep. Carolyn Maloney said the U.S. Postal Service Board of Governors should immediately suspend DeJoy as the probe moves forward.

The Democrat-controlled House Oversight Committee is launching an investigation into Postmaster General Louis DeJoy over reports that, as CEO of a major North Carolina logistics company, he orchestrated an unlawful straw-donor scheme for the benefit of Republican political candidates, the latest scandal threatening to engulf the head of the U.S. Postal Service.

In a statement late Monday, House Oversight Committee Chairwoman Rep. Carolyn Maloney (D-N.Y.) urged the USPS Board of Governors to immediately suspend DeJoy as the probe moves forward and said her panel will also investigate the postmaster general for possible perjury.

DeJoy, the former head of fundraising for the Republican National Convention in Charlotte, faces “criminal exposure” both if the claims surrounding the alleged straw-donor scheme are true and “also for lying to our committee under oath,” said Maloney.

During sworn testimony before the Oversight Committee last month, DeJoy expressed outrage at a line of questioning pursued by Rep. Jim Cooper (D-Tenn.), who pushed the postmaster general on whether he reimbursed any of his company’s top executives for contributing to President Donald Trump’s 2016 presidential campaign.

“That’s an outrageous claim, sir, and I resent it,” said DeJoy, himself a megadonor to Trump’s campaign. “The answer is no… I’m fully aware of legal campaign contributions, and I resent the assertion, sir. What are you accusing me of?”

Last month, LOUIS DeJOY rejected as “outrageous” a Dem question about whether he had repaid executives at his firm for donating to TRUMP, which would be illegal.

But ex-employees say they felt pressure to donate to other GOP candidates & were reimbursed. https://t.co/XExexZ2npY
— Kenneth P. Vogel (@kenvogel) September 6, 2020

The Washington Post and the New York Times reported Sunday that DeJoy pressured his employees at New Breed Logistics to write checks for Republican congressional and presidential candidates and reimbursed them for doing so through bonuses. DeJoy served as CEO of the company from 1983 to 2014.

“Louis was a national fundraiser for the Republican Party. He asked employees for money. We gave him the money, and then he reciprocated by giving us big bonuses,” David Young, DeJoy’s director of human resources at New Breed Logistics, told the Post. “When we got our bonuses, let’s just say they were bigger, they exceeded expectations—and that covered the tax and everything else.”

According to the Times,

A review of campaign finance records shows that over a dozen management-level employees at New Breed would routinely donate to the same candidate on the same day, often writing checks for an identical amount of money. One day in October 2014, for example, 20 midlevel and senior officials at the company donated a total of $37,600 to the campaign of Senator Thom Tillis, Republican of North Carolina, who was running to unseat a Democratic incumbent. Each official wrote a check for either $2,600, the maximum allowable donation, or $1,000.

The straw-donor allegations came as DeJoy was already facing growing calls to resign over his sweeping Postal Service operational changes that significantly slowed mail across the nation and threatened the timely delivery of ballots for the November election, sparking allegations of deliberate and politically motivated sabotage by the postmaster general.

As Common Dreams reported, Democratic lawmakers and other officials said the new revelations provide further reason for DeJoy to step aside or be removed by the USPS Board of Governors, which unanimously appointed him in May despite his potential conflicts of interest and complete lack of prior experience at the Postal Service.

“Megadonor Louis DeJoy seemingly broke multiple campaign finance laws, continuing a dangerous pattern of turning our institutions of government upside-down, from the Postal Service to our election campaigns,” Karen Hobert Flynn, president of Common Cause, said in a statement Sunday.

“It is extraordinarily disturbing,” Flynn continued, “that megadonor DeJoy is abusing his power as Postmaster General to help President Trump win reelection, meanwhile apparently demonstrating disregard for key campaign finance laws designed to promote the integrity of our democratic elections.”

Here’s the most revealing part of the postmaster general’s response to explosive allegations about an illegal donations


September 8, 2020 By Cody Fenwick, AlterNet - Commentary
  
Louis DeJoy (YouTube/screen gra


Most years, the vast majority of Americans — and probably even political reporters — would be unable to name the postmaster general. But in 2020, Louis DeJoy has become a household name for overseeing a dramatic decline in the U.S. Postal Service’s performance, the result of policies that many fear may intentionally or unintentionally interfere with the processing of mail-in ballots during the November election.

With DeJoy already in the spotlight, a new report from the Washington Post about the longtime Republican donor’s shady fundraising schemes on Sunday has further sullied his reputation. But it’s not just his public standing under threat — the allegations suggest he maybe be vulnerable criminal charges for a vast election finance crime.

The Post explained:

Five people who worked for DeJoy’s former business, New Breed Logistics, say they were urged by DeJoy’s aides or by the chief executive himself to write checks and attend fundraisers at his 15,000-square-foot gated mansion beside a Greensboro, N.C., country club. There, events for Republicans running for the White House and Congress routinely fetched $100,000 or more apiece.

Two other employees familiar with New Breed’s financial and payroll systems said DeJoy would instruct that bonus payments to staffers be boosted to help defray the cost of their contributions, an arrangement that would be unlawful.

The report got one source — DeJoy’s former human resources Director David Young — to confirm the scheme on the record.

“Louis was a national fundraiser for the Republican Party. He asked employees for money. We gave him the money, and then he reciprocated by giving us big bonuses,” he told the Post. “When we got our bonuses, let’s just say they were bigger, they exceeded expectations — and that covered the tax and everything else.”

Others confirmed the details anonymously to the outlet, which the reporting backed up with records:

A Washington Post analysis of federal and state campaign finance records found a pattern of extensive donations by New Breed employees to Republican candidates, with the same amount often given by multiple people on the same day. Between 2000 and 2014, 124 individuals who worked for the company together gave more than $1 million to federal and state GOP candidates. Many had not previously made political donations, and have not made any since leaving the company, public records show. During the same period, nine employees gave a combined $700 to Democrats.


The New York Times matched this reporting, finding similarly:

A review of campaign finance records shows that over a dozen management-level employees at New Breed would routinely donate to the same candidate on the same day, often writing checks for an identical amount of money. One day in October 2014, for example, 20 midlevel and senior officials at the company donated a total of $37,600 to the campaign of Senator Thom Tillis, Republican of North Carolina, who was running to unseat a Democratic incumbent. Each official wrote a check for either $2,600, the maximum allowable donation, or $1,000.

Similar patterns of donations — including to the Republican National Committee and every Republican presidential nominee from President George W. Bush to Mitt Romney — stretch back to 2003, campaign finance records show.

This all looks quite bad for DeJoy. The clear implications of all this reporting is that DeJoy may have been running a criminal straw donor scheme, in which he essentially used company employees to donate to political candidates and circumvent disclosure laws and contribution limits. This isn’t some rarefied law or obscure statute — these schemes are prosecuted regularly.

Josh Stein, the attorney general in North Carolina where DeJoy was based, explained: “It is against the law to directly or indirectly reimburse someone for a political contribution. Any credible allegations of such actions merit investigation by the appropriate state and federal authorities. Beyond this, it would be inappropriate for me as Attorney General to comment on any specific matter at this time.”

But what was most interesting was DeJoy’s own response to the stories:

Louis DeJoy, in his personal capacity and as CEO of New Breed Logistics, encouraged employees and family members to be active in their communities, schools, churches, civic groups, sporting events and the politics that governs our nation. Mr. DeJoy consistently provided family members and employees with various volunteer opportunities to get involved in activities that a family member or employee might feel was important or enjoyable to that individual.

Mr. DeJoy was never notified by the New Breed employees referenced by the Washington Post of any pressure they might have felt to make a political contribution, and he regrets if any employee felt uncomfortable for any reason.

During his leadership of New Breed Logistics, Mr. DeJoy sought and received legal advice from the former General Counsel of the Federal Election Commission on election laws, including the law of political contributions, to ensure that he, New Breed Logistics and any person affiliated with New Breed fully complied with any and all laws. Mr. DeJoy believes that all campaign fundraising laws and regulations should be complied with in all respects.

What’s missing from the denial is any actual refutation of the facts that seem to make up key elements of a criminal scheme: the reimbursement of political donations. Instead, DeJoy denies knowing anyone felt “pressured” to donate and says he regrets if he made anyone “uncomfortable.”

While it is illegal to coerce employees to give to political campaigns, it is not illegal to encourage them to do so. The vagueness of the distinctions between encouraging, pressuring and coercing could make this violation difficult to prove as a crime, so it’s not the most worrying allegation against DeJoy (though oddly, the Times framed its headline around the idea of “pressuring” employees to donate). He should be most worried about the allegation that he was reimbursing people for making political donations — exactly the charge he doesn’t deny.

Instead, it seems he’s already laying the groundwork for a legal defense against such charges. The statement says that DeJoy “sought and received legal advice from the former General Counsel of the Federal Election Commission on election laws, including the law of political contributions, to ensure that he, New Breed Logistics and any person affiliated with New Breed fully complied with any and all laws.” This suggests he would argue that, even if his donation scheme did violate the law, he might not be criminally culpable because he was under the impression that his actions complied with the relevant statutes.

This may be hard to believe on it’s face, and there’s a specific reason to doubt it as an excuse. While testifying before Congress, DeJoy acted incredulous when a lawmaker asked him about reimburising donations.

“That’s an outrageous claim, sir, and I resent it,” he said. “What are you accusing me of?”

Indeed, reimbursing donations to circumvent election finance law is outrageous. Campaign finance law is designed to place limits on and create transparency around the funding of elections, ideally limiting the influence big money donors like DeJoy — the kinds of people who can get important jobs like postmaster general — can have. Breaking these laws is a big deal. So why won’t DeJoy deny it?

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Nigerian scientists have identified seven lineages of SARS-CoV-2

AFRICAN CENTER OF EXCELLENCE FOR GENOMICS OF INFECTIOUS DISEASE
Nigerian scientists are working to better understand coronavirus.


By Christian Happi
Professor of Molecular Biology and Genomics, Redeemer's University, Nigeria

September 7, 2020

By the first week of August 2020 the COVID-19 pandemic had caused about 654,000 deaths worldwide. In Nigeria, as of Sept. 7, there were 55,000 confirmed cases recorded with 1057 deaths.

The pandemic hit the African continent last, and the numbers remain comparatively low for most countries. But there is a strong view among scientists that data recorded on the continent are an underestimate as countries struggle with testing.

As frantic work continues to find a vaccine, countries like Nigeria continue to do all they can to curb the spread of the virus.

In Nigeria this includes support from both the public and private sector and academia. One example of the work being done is the testing and research being undertaken at the African Centre of Excellence for Genomics of Infectious Diseases, Redeemer’s University, Ede, Osun State. The center has been focused on infectious disease research including malaria, Lassa fever, Ebola, HIV, yellow fever, and more recently SARS-CoV-2.

Nigeria recorded its first coronavirus infection on Feb. 27, through an Italian immigrant whose samples were sent to the African Centre of Excellence for Genomics of Infectious Diseases by the Nigerian Centre for Disease Control for genome sequencing. As a result of this work, the first SARS-CoV-2 sequence data on the African continent was published on Mar. 6.
It is important to track lineages as they can be very useful for determining how a virus spreads through communities or populations.

Genome sequencing helps us understand the virus’ epidemiology and evolution. Globally, there is only one strain of SARS-CoV-2, which is also the same as the strain circulating in Nigeria. However, there are more than 1,000 lineages of this novel virus in circulation around the world.

Lineage classification is based on mutations or genetic variants that connect the ancestral type to the genetics of the descendants, which do not change the physiology of the virus.

Viral lineages are formed when mutations occurring do not change the encoded viral protein. However, any mutation that leads to a change in viral pathogenicity, virulence or immunogenicity, will become a new strain.

If a mutation affects the part of a virus that the immune system uses to neutralize the virus, this then becomes a strain that can infect people previously infected or vaccinated. An example of this occurs with the flu virus, which is why a new vaccine is needed for the seasonal flu each year.

We have so far identified seven of these over 1,000 lineages in Nigeria. Each lineage represents sequences from different countries.
The lineages

Some of the lineages have overlapping sources of origin.

The first lineage represents viral sequences from China and global exports including southeast Asia, Japan, South Korea, Australia, the US and Europe.

The second lineage represents a viral sequence from the Italian outbreak. The third represents a new European lineage. The fourth represents sequences from the UK, Iceland, and Turkey.

The fifth represents sequences from Netherlands, Turkey, Saudi Arabia, Egypt, Finland and England. The sixth represents a sequence from the Netherlands. The seventh represents sequences from Turkey, Saudi Arabia, Egypt, Finland, and England.
Recent reports suggest new SARS-CoV-2 “strains” have arisen through mutation that have the potential to increase the severity of the pandemic.

The lineages identified in Nigeria are not different from the ones identified in other parts of the world and there are no reports of strains or lineages unique to Nigeria thus far.

The number of lineages circulating in Nigeria will be updated as we generate more sequence data, taking into consideration the current evidence of community transmission.

It is important to track lineages as they can be very useful for determining how a virus spreads through communities or populations. This means that if a new strain should appear, scientists would have important information needed to contain it. This is especially important for the African region because if the new strain happened to be more virulent, or more transmissible, it would put great pressure on weak health systems.
What a mutation could mean

A mutation in SARS-CoV-2 could confer an advantage to the virus. For instance, a virus with an advantageous mutation could affect humans more readily, thereby spreading more easily between people; it could be less recognized by the immune system, or more pathogenic.

Recent reports suggest new SARS-CoV-2 “strains” have arisen through mutation that have the potential to increase the severity of the pandemic.

A study analyzed a set of mutations in the spike protein of SARS-CoV-2, and concluded that a specific mutation had increased in frequency as the virus spread from China into Europe, North America, and Australia. The authors concluded that this increase in frequency arose because the mutation had made the virus more transmissible.

Scientists in Nigeria, as elsewhere, have been tracking these developments very closely. There is a trend in the increase in the number of this spike protein mutation in Nigeria.
Why it matters

Continuous monitoring of viral genetic changes or mutations is important as it provides valuable information on the evolution of the virus and its implications.

If a mutation occurs in the region of the virus that was used to develop the vaccine, the vaccine will not be as effective. This is what happens in the case of flu vaccines because the virus keeps mutating into a new strain.

We do not know much about SARS-CoV-2 yet. And we don’t know if the virus will mutate into a new strain down the line. If it does happen, it could require the development of a new vaccine.

Nothing can be done to prevent viruses from mutating. They do so naturally as a survival strategy. These mutations happen when the virus makes an error when its DNA or RNA is being replicated, or due to selective pressure.

Currently, researchers are working to determine how many medically relevant strains of SARS-Cov-2 are circulating and what the consequences are for treatment and vaccine development.

Christian Happi, Professor of Molecular Biology and Genomics, Redeemer’s University, and contributor: Ify Aniebo Redeemer’s University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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THE INHERITANCE OF LOSS

America’s new wealthy have so little to offer society

AP PHOTO/MATT SAYLES
Gatsby? What Gatsby?

United States May 9, 2014 This article is more than 2 years old.


In F. Scott Fitzgerald’s The Great Gatsby, East Egg represents inherited wealth and privilege, while West Egg represents wealth earned through innovation and hard work, a distinction at the core of the American ideal. We have always embraced a dynamic capitalism, marked not by stasis but rather “creative destruction,” lionizing trust-busters as heroes of competition. Joseph Schumpeter, who coined the phrase, feared that eventually capitalism would lead to corporatism and destroy the entrepreneur, the lifeblood of the capitalist system. One disturbing implication of Thomas Piketty’s new book, Capital, is that the American economy is slipping into a form of “rentier” capitalism, in which passive income from wealth, increasingly in the form of inherited fortunes, is supplanting dynamism, hard work and innovation. The term rentier came into use in the mid-19th century to describe people who lived off income from property rather than creating something of value. And now the rentiers have found a way to protect their gains—buying influence in the political system.
The rise of rentier capitalism

Richard Hofstadter observed about American capitalism, “Once great men created fortunes; today a great system creates fortunate men.” This was what Fitzgerald saw in the 1920s: dead, inherited wealth next to dynamic new money. He saw the former as aristocratic, with only the facade of knowledge and virtue, while the latter was entirely uninterested in wisdom and seduced by wealth. Oscar Wilde observed the same in Victorian England, where the illusion of virtue (being named Earnest) was far more important than its practice. Today, much the same dynamic exists between the inherited rentier wealth of the Kochs and Waltons and the new money of the Zuckerbergs and Brins. There was a day when aristocrats were at least cultured. Today, instead, we have a wealthy class with the culture of new money and innovativeness of old money (i.e., rather little of either). This new rentier class, with little to offer society, subsists largely on legalized grift or, in economic terms, rent.

Rents comes in two forms, both referring to income received as a result of status rather than earned by hard work or as compensation for a product, idea or service that benefits society broadly. The first form is inherited wealth and the second is monopolistic market power. The first is easy to see. The second has changed from vertical business trusts to Jamie Dimon as the reincarnation of J. Pierrepont Morgan armed with supercomputers, phalanxes of physicists for quantitative analysis and legions of lobbyists. In our post-liberal economy, these two types of rentiers interact in a feedback loop that has changed the meaning of American inspired (and imposed) western capitalism.

Thomas Piketty paints a dystopian picture of the consequences of this accumulation of wealth in his new book. Piketty describes an underlying property of capitalist economies—if return on capital assets exceeds growth of the economy, wealth will flow into investment in assets, land, companies and financial assets and away from entrepreneurial innovation. Innovation requires distribution of income to the workers who produce products and services, empowering them to consume such goods and services in a virtuous circle measured by consumption driven growth. In contrast, the pool of passive capital asset investment will grow as earnings accumulate instead of being used for consumption. For Piketty, this is the usual configuration of a capitalist economy, rather than the idyllic days of 1945-1979 during which equality increased and the financial well-being and security of the “typical American family” marched relentlessly forward.

Today, America’s top 1% makes its income primarily from capital, not labor.


Piketty writes, “In terms of total amounts involved, inheritance has thus nearly regained the importance it had for nineteenth century cohorts.”


He notes, however, that this truth has yet to reach popular culture, where “recent American TV series feature heroes and heroines laden with degrees and high-level skills.”

Piketty concludes that we may soon reach a point in which social rent-seeking àl la marrying wealthy will be a far more effective path to prosperity than entrepreneurship. This is how capitalism dies—not with a revolution—but rather vitiated by rentiers, increasingly myopic and addicted like a junkie to the high of wealth accumulation.
The rise of rentier finance

These conditions are closely related to the massive growth of an overtly rent-seeking financial sector. Rather than investing in the “real economy,” financiers make money through increasingly obfuscated and complex financial “innovations.” With the deregulation of finance in the Clinton era, finance became increasingly rent-seeking, building towers of leverage rather than companies. During the period of growing disparity of incomes and wealth described by Piketty, this differential between financial sector wages has increased by a staggering amount. Thomas Philippon and Ariell Reshef, find that, “that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.”


Investment in the rent-supercharged financial sector itself has been a primary destination for accumulated wealth and it has greatly increased returns relative to growth. This capital investment fuels the growth of the rent-seeking business of the financial sector, which causes wealth to accumulate and need to be invested, and so on in a loop. The two trends reinforce each other.

The politics of rent

The development of rentier capitalism was not inevitable. The most nakedly self-interested class in modern history owes a substantial debt to a slavish political system. As Paul Krugman notes of Bush era policies, “True, the top tax bracket on earned income fell from 39.6 to 35 percent. But the top rate on dividends fell from 39.6 percent (because they were taxed as ordinary income) to 15 percent — and the estate tax was completely eliminated.”

The Koch brothers, who bankroll a large portion of the conservative dis-information machine are great examples. They claim to love free markets but in truth nothing terrifies them more. The freedom that they seek is the freedom to exploit the market power that their inherited wealth affords them. They use the political sphere to entrench the wealth inherited from their father. Piketty notes that the American tradition is one of high progressive taxation, especially on bequests, to prevent an American analog to European-style aristocracy. Even the patron saint of libertarianism, Robert Nozick, argued that an estate tax was fair, and suggested that, “taxes will subtract from the possessions people can bequeath the value of what they themselves have received through bequests.” Two generations of rentiers are rather enough.

As we have seen, the financial sector perpetuates and is fueled by the new rentier class. In her book, All The Presidents’ Bankers, Nomi Prins traces the history of banker influence in the highest corridors of power, when “the titans of banking” replaces “the barons of industry as the beacons of economic supremacy in the United States.”

Economic inequality perpetuates itself through political inequality, which breeds cronyism. Supreme Court decisions like McCutcheon and Citizen’s United enhance the power of the super wealthy to use the political system to extract rents. Larry Bartels, Martin Gilens, Dorian Warren, Jacob Hacker, Paul Pierson, and Kay Lehman Schlozman have found that the rise in economic inequality has coincided with a rise in political inequality. The wealthy are using the political system to bolster their wealth, and while both parties are certainly complicit, in few eras has the political system been so nakedly captured by big money.
The implications

The implications are stark. First, liberals must note the important distinction between wealth earned through creativity and labor and wealth accumulated to capital, and focus their attention on the latter.

A growing portion of today’s moneyed elite is neither virtuous nor meritorious, it is parasitic. Second, government must create an economy that rewards work, not property. The Lockean ideal quickly becomes farce when one family owns more wealth than the poorest 40 million Americans.

Taxing inheritance and empowering the middle and lower income segments of society will slow the drift toward an economy dominated by a growing rentier class. Moreover, a moderate increase in inflation could greatly benefit the vast majority of Americans. Higher inflation, even higher than the official target, would adversely affect the asset-holding super rich whose asset value would erode with inflation, but would benefit the rest of the public by encouraging immediate consumption and decreasing the burden of existing debt.

But there is a more fundamental way to address the problem. The modern financial sector constitutes a powerful extra-governmental system of redistribution in favor of the wealthiest Americans. A large portion of the financial sector is in the business of extracting value from the flows of money within the economy with little or no benefit to the intermediation of the allocation of investment capital to socially beneficial uses.

The financial reforms that were adopted in response to the 2008 financial crash were overwhelmingly focused on reducing the potential for a repeat of the catastrophic run on the financial system that triggered the crisis. While this was an admirable endeavor, a second phase of reform of the financial sector limiting its role in the accumulation of wealth at the top and the stagnation and decline of the well-being and security of the rest of society is essential to a return to a sustainable economy. The myriad practices through which the financial sector extracts value from the system without enhancing the process of allocating capital to purposes that serve the public must be eliminated to reverse the drift toward a rentier economy. These practices can be identified, starting with high-speed trading, predatory derivatives transactions, and tax incentives for hedge funds. Policy makers simply need to develop the backbone to deal with them.
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CHINA
The Fall and Rise of the Rentier Class

Wealth will accumulate around rentiers at an increased rate, and wealth inequality will become a potential catalyst of social instability.


Wu Xiaobo Dec 18, 2016 

Wu XiaoboWriter
He is best known for his book, ‘Storming 30 Years: 1978—2008 Chinese Enterprises.’


“Are you one of this fund’s LPs?”

An investors’ reception at No. 27, the Bund, Shanghai. As attendees murmur politely to one another under the clink of glasses and raucous toasts, this seems the most natural of questions.

No. 27 is located in the center of the Bund, Shanghai’s waterfront promenade. From here, you can take in the Oriental Pearl Tower, the Citigroup Tower, and the Shanghai Tower in a single glance. Originally the headquarters of British trading company Jardine Matheson, the building was reclaimed by the Chinese government after the Communist Party took power in 1949. Today, it is the most prominent of the Bund’s many fashionable landmarks, housing the largest wine cellar in Asia, and the House of Roosevelt that stands on the site frequently hosts conferences and other events. Of these, the most common are LP receptions.

LP, or “limited partner,” refers to a limited liability partner of a venture capital firm. LPs invest in business projects but are not responsible for the intricacies of management. In the parlance of political economists, this group is referred to as the “rentier class” — people in possession of real estate, stocks, securities, or bills, and who, simply through the accumulation of interest, dividends, and rent, can generate a stable or even expanding stream of revenue.

If we were to divide a person’s income into two categories — income from wages and income from assets — then a proportional increase in the latter would signify an increase in securitization. If all of a person’s income is derived from assets, then they have escaped the confines of employment and become a rentier in toto. Traditionally, socialist countries have held rentiers in very poor regard, frequently equating them to “parasites.”

Nikolai Bukharin, an early 20th century Russian political theorist, even wrote a book on this topic, entitled “Economic Theory of the Leisure Class,” in which he expounded a Marxist criticism of rentiers, who formed the so-called leisure class of his treatise. Bukharin believed that rentiers were detached from production, making them the part of the bourgeoisie furthest removed from the proletariat. Their life’s goal was to use securities and underlying financial capital to extract surplus value from capitalists working in the sphere of production. As a result, these capitalists diverted some of the surplus value produced by workers into financial capital. Therefore, according to Bukharin, the existence of the rentier class demonstrated capitalism’s waning entrepreneurial spirit and was a clear sign of capitalism’s decline.

The last group of rentiers in Chinese society disappeared around 1966, before the start of the reform and opening-up period. In September 1954, China’s State Council passed its “Provisional Regulations Regarding the Joint Public-Private Management of Industrial Enterprises,” which declared that “enterprises under joint public-private management will be publicly led; the relevant government administrations will send representatives to oversee management in cooperation with private representatives.”

The regulations meant that private owners had essentially lost the ability to manage their own businesses. This corresponded with the State Council’s release of a new profit distribution program, in which dividends to investors — including shareholders’ stock dividends and bonuses for managers, factory directors, and members of the board — only made up around 25 percent, while the majority of the company’s profits went to the government and workers.

Data from the Chinese Academy of Social Sciences’ Institute of Economics show that at the time, the country contained 710,000 private business owners who were employed but received fixed-interest payments, and 100,000 “economic agents” who lived off on interest alone. These 810,000 people were the remnants of the rentier class. Once the Cultural Revolution broke out in 1966, their income sources dried up entirely, and the entire country was purged of private capital.


Wealth will accumulate around rentiers at an increased rate, and wealth inequality will become a potential catalyst of social instability.
- Wu Xiaobo


The re-emergence of rentiers probably began sometime in the latter half of the 1990s. A number of families were able to increase their asset-based income by investing in the stock market and real estate. Large-scale emergence of rentiers, however, is undoubtedly a phenomenon of the last five years, and there are several reasons for this.

First, China’s financial market entered an era of securitization. The growing popularity of trusts, funds, bonds, and equities as avenues for investment, along with the rising prevalence of business mergers and acquisitions, has allowed the realm of personal finance to massively expand its borders; concurrently, securitization has vastly increased the number of profit opportunities available. It was this foundation that heralded the rise of the true professional investor.

Second, many businessmen born in the ’50s, ’60, and ’70s have found themselves caught in a production bottleneck, as their firms require industrial upgrading, suffer from a lack of innovation, and experience competition from younger entrepreneurs. This has led many older businessmen to free up enormous sums of money and try to break into the investment and financial markets instead. This group, in turn, has become a formidable investment force that is completely distinct from the stock market’s retail investors.

Third, as the middle class has expanded to number in the hundreds of millions, high-net-worth individuals at the top of the pyramid have become increasingly fond of investing in securities. Due to the profit-seeking nature of capitalism, these individuals tend to have much easier access to quality assets, further stimulating their enthusiasm for investment.

According to data recently released by Zero2IPO Research, a renowned research organization focusing on venture capital and private equity trends in the greater China region, the rentier class made 698 investments in the third quarter of 2016. Figures were released for 631 of the investments, involving a total sum of 21.76 billion yuan ($313 million). Hovering around these financial investment organizations is China’s up-and-coming rentier class.

In early June 2016, the Boston Consulting Group’s Global Wealth Report found that China’s millionaires — people with investable assets (cash, stocks, and debt securities) not including real estate valued in excess of $1 million — consisted of approximately 2.1 million families. This is the second largest group of rentiers in the world today.

The effects of a growing rentier class on a country’s economy are topics of heated debate. In 2013, French economist Thomas Piketty rocked the world with the release of “Capital in the Twenty-First Century,” his award-winning book. Piketty discovered that throughout the history of human wealth distribution, the powerful forces driving apart capital and labor have never truly diminished. In fact, apart from during wartime, most developed nations show a steady increase in inequality, and this rate of increase is accelerating.

Piketty has also studied China specifically. His findings show that as an emerging world power, China’s economic growth over the past 30 years indicates a clear bias toward those in the top 10 percent of income-earners. This means that return on capital has greatly exceeded economic growth, and also points to a gradual expansion of the rentier class.

Looking on the bright side of things, a massive rentier class will give rise to a new business philosophy. Rentiers will find more enjoyment in “intellectual consumption,” promoting literature, sports, tourism, and other industries. Well-educated rentiers will bring about a brand-new aesthetic of consumption, and more and more people will devote themselves to social charity and public welfare projects. Because of this, China will leave behind the barbaric age of unfettered materialism, and its abundance of human potential will be put to new use.

On the other hand, wealth will accumulate around rentiers at an increased rate. Particularly during periods of long-term quantitative easing, wealth inequality will become a potential catalyst of social instability. At the same time, social classes will become more and more sclerotic.

Above the fireplace in the House of Roosevelt’s visiting room hangs an enormous oil painting of the former American president from whom the space takes its name. Off to one side, the iconic red pop-art portrait of Che Guevara seems to float into view, his face expressionless, his eyes gazing into the distance.

From the point of view of a radical socialist revolutionary, Bukharin’s ideas — that all rentiers are immoral, and that only violence can restore equality — have a certain allure. Yet from the point of view of a reformer, Roosevelt’s philosophy seems to be the true crowd-pleaser. As he saw it, creating a sound social security net and instituting tax reforms to facilitate redistribution of wealth were both methods for eliminating inequality.

Since the start of the 21st century, Western economists have returned to the question they faced more than a hundred years ago. They’ve begun to seriously consider the topic of fairness in wealth distribution, and vast numbers of influential scholars have expressed their views on the subject. China, meanwhile, will need to face up to this difficult question within the next decade. Growing prosperity cannot cover up emerging conflict, and instituting reform is a race against time.

Looking out from the full-length windows of No. 27, the resplendent facades of the Pudong financial district loom large opposite the Bund, testaments to the spoils of affluence and excess. They don’t look real, and neither do they reflect the real status of the Chinese economy. Like the champagne-filled glasses at the LP’s reception, the markets are overflowing with kaleidoscopic, scintillating bubbles.

(Header image: Visitors look at a monitor displaying an image of the Shanghai World Financial Center in Shanghai, Feb. 2, 2013. Tomohiro Ohsumi/Bloomberg via Getty Images/VCG)

We are a team of writers, editors, and researchers from within China and abroad. We belong to Shanghai United Media Group, and share our offices with our sister publication, The Paper. https://www.sixthtone.com
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